Commission Impossible? - Shaping places through strategic commissioning Dr Laura White Edited by Tom Shakespeare With foreword by Rt Hon Hazel ...
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Commission Impossible? Shaping places through strategic commissioning Dr Laura White Edited by Tom Shakespeare With foreword by Rt Hon Hazel Blears MP www.localis.org.uk
About Localis Who we are Who we are Localis is an independent think-tank dedicated to issues related to local government and localism.We carry out innovative research, hold a calendar of events and facilitate an ever growing network of members to stimulate and challenge the current orthodoxy of the governance of the UK. Our philosophy We believe in a greater devolution of power to the local level. Decisions should be made by those most closely affected, and they should be accountable to the people which they serve. Services should be delivered effectively. People should be given a greater choice of services and the means to influence the ways in which these are delivered. What we do Localis aims to provide a link between local government and the key figures in business, academia, the third sector, parliament and the media.We aim to influence the debate on localism, providing innovative and fresh thinking on all areas which local government is concerned with.We have a broad events programme, including roundtable discussions, publication launches and an extensive party conference programme. Find out more Please either email email@example.com or call 0207 340 2660 and we will be pleased to tell you more about the range of services which we offer. You can also sign up for updates or register your interest on our website.
1 About Mears Mears is the UK’s leading provider of social housing maintenance and care services. More than 13,000 people work at Mears and every year we are welcomed into the homes of over 500,000 people. Mears working in partnership Mears continually looks for ways to drive service improvements. We do this in partnership with local authorities, housing associations, health authorities, charities, local communities and individuals. We use our experiences to invest in innovations that secure long-term outcomes rather than short-term targets. Why is Mears supporting this publication? Commissioning has a vital role to play in improving the quality of life for groups and individuals which is why we welcomed the opportunity to support Localis and Essex County Council in delivering this timely and valuable report. To find our more please contact: Abigail Lock Head of External Relations (Interim) firstname.lastname@example.org 0780 8647836 www.mearsgroup.co.uk
2 Contents Acknowledgements 3 Foreword by Rt Hon Hazel Blears MP 4 Executive Summary 6 Introduction 10 1 What is Strategic Commissioning? 12 2 Approaches to Strategic Commissioning 24 3 What Does a Strategic Commissioning Council Look Like? 38 Conclusion 45 Appendix 48 Bibliography 53
3 Acknowledgements This project was led by Dr Laura White, Policy & Strategy Officer at Essex County Council and edited by Tom Shakespeare, Director of Policy and Research at Localis. We would like to thank numerous others from Essex County Council, Mears and Localis who contributed to the research and drafting at all stages. Finally, we would also like to acknowledge the input and insight of the following individuals throughout the research and consultation, although this list is by no means exhaustive: Laurence Ainsworth (Chester West & Cheshire Council), Louise Beatty (Cabinet Office), Ian Campbell (Wakefield Council), Cllr Paul Carter (Kent County Council), Justin Griggs (NALC), Paul Jenner (3SC), Cllr Mike Jones (Chester West & Cheshire Council), Emma Jupp (Age UK), Henry Kippin (2020 Public Services Hub), Ian Lewis (Hackney Council) , Gordon Murray, Kate Mulley (Action for Children), John O’Brien (London Councils), Helen Randall (Towers and Hamlins), Cllr Steve Reed (Lambeth Council), Steve Spiers (South Gloucestershire Council), John Tizard (LGIU), Nicholas Webb (Camden Council).
4 Foreword by Rt Hon Hazel Blears MP Councils have sometimes struggled with competing priorities when trying to strategically commission services and in the past have perhaps been too keen to rely on a small number of commissioning models that have arisen from political instead of practical concerns. These two somewhat stylised models have inherent flaws. The Nicholas Ridley manifestation of hands-off government encouraged councils to act as holding companies, meeting once a year to award contracts to private companies and focusing solely on economic value and the bottom line. On the other hand, the classic statist model, which some councils have used to provide all services from leisure centres to adoption services, delivered a controlling model that lacked personalisation and overlooked community involvement. The challenge for councils is to find a middle way between these extremes – finding new relevant models that can effectively and efficiently commission services that achieve good value. By highlighting some of the innovative examples of strategic commissioning from across the country, this timely report offers an extremely useful contribution to the debate about the future of local services. The report specifically refers to the London Borough of Lambeth and the co- operative council model that is being pioneered by Cllr Steve Reed. It is empowering local residents, community groups and mutuals to shape and take control of their local services, embracing and using local knowledge to commission services that really work. There is real innovation going on in my own constituency too. Salford Council’s ‘Unlimited Potential’ is a social enterprise that employs more than 40 people working on health projects commissioned by the council and in partnership with the NHS targeted at those most in need of support, and this year will be reinvesting their surplus back into the local community though an Innovation Fund, helping local people to help themselves As these examples and the report shows, councils are taking different approaches to tackle the variety of challenges that their areas face. The reason that these have been successful is because they represent a break from stale models of the past and show how commissioning can be developed to localise and personalise services.
5 The challenge for local councils is to determine what exactly they want to achieve, and then how best to commission to implement their strategic goals. This will differ from place to place and each council’s aims should reflect the needs and aspirations of their local community with renewed focus on accountability. People need to know who is responsible for the services they use, and it is the role of councils to ensure adequate and improving service provision, but this can only reflect what local people want if they feel engaged in the process. Much of this relies on a redefinition of the interaction between citizen and state and moves away from contracted transactions to a relationship placing both on a more equal footing. By commissioning more effectively and collectively not only will councils benefit from greater efficiencies that will allow savings to be made in a difficult financial climate, but working with local people and giving them greater involvement and responsibility over the way that their money is being spent will bring together service providers and service users in partnership to drive continual improvement. The report’s conclusions are relevant for central government and councils of all political persuasions, and will undoubtedly become increasingly pertinent in the years ahead. Foreword
6 Executive Summary The time is right for councils to radically rethink how services are delivered The role of councils is changing in the face of economic pressures and the Government’s plans to decentralise power from Whitehall to local government and beyond. This report suggests that councils have a once in a generation opportunity to cement their position of enhanced power by taking a ‘strategic commissioning’ approach to the delivery of local services. Strategic commissioning, defined broadly as: “the process of identifying needs within the population and developing policy direction/service models and the market to meet those needs in the most appropriate and cost effective way”,1 offers opportunities for councils to better fulfil their role as ‘place-shapers’ of their local areas. The commissioning process is best visualised as a back-and- forth ‘steering wheel’ motion between need assessment, the market, resources and delivery, rather than the typically cyclical model used at present. This places a particular emphasis on a continuous dialogue between various bodies. Local strategic commissioning involves a move away from an outdated focus on cost which dominated the Compulsory Competitive Tendering (CCT) era of the 1980s, through to the centralised ‘best value’ regime which dominated the Government’s approach to local government over the last decade, towards a more localist understanding of ‘value’. Councils have already recognised the importance of strategic commissioning, and 81% of council leaders and chief executives surveyed for this report say they are considering taking on an even greater strategic commissioning role in the near future.2 In this report, we take the position that strategic commissioning should be ‘provider neutral’, focusing on local need and the best pathways to deliver that need. The public, after all, prioritise an effective public service above and beyond who provides that service. Strategic commissioning offers substantial benefits for councils and local residents By focusing on what is most important for local residents, strategic commissioning can result in a wide range of benefits, including: • Greater efficiency – The commissioning process opens up new possibilities to deliver services in more efficient ways, as well as opportunities to take advantage of initiatives such as pooled budgets and early intervention investment (eg social impact bonds) to deliver long-term value for money for 1N ational Procurement Strategy, in ECC (2010) ‘Procurement Strategy: council-tax payers. 2011/12-2013/14’, p.6. • A focus on outcomes, not processes – By studying the needs of local residents, 2 Localis survey – see Appendix and by measuring the long term local ‘value’ of particular services, councils
7 can ensure the provision of services which deliver the most important outcomes for residents – improving lives, not ticking boxes. • Stimulating local enterprise – By taking a comprehensive strategic commissioning approach, councils could leverage their significant resources and significant buying power to create new markets in the provision of services, which could create new jobs and growth, as well as the potential to drive competition, choice and innovation in local services. • Focus on what is strategically important – By ‘externalising’ the provision of services, there may be opportunities to resolve any conflict in the council’s role as both commissioner and provider of services. More specifically, councillors may be able to take a more strategic approach by focusing solely on the commissioning and scrutiny of services rather than the day-to-day provision. Most councils predict a shift in service provision from in-house to voluntary organisations (82%), public sector shared initiatives (80%), SMEs (75%) and large private organisations (68%), with only 5% of councils saying that more services will be delivered in-house. Some councils are already looking at innovative ways to deliver better services Some councils are already using, or plan to use, innovative approaches to deliver on their strategic commissioning plans, including outcomes focussed contracts (97%), pooled budgets (86%), flexible contracts (84%), payment by results (78%) and social return on investment models (53%). A handful of councils have already made significant steps towards becoming wholesale strategic commissioners of local services. These include: • Mears and Hertfordshire County Council – This is a joint initiative between a private company and a local authority to implement a payment-by-results model for reducing contact time, promoting independence and improving outcomes for users of a ‘Telecare’, enabling people to manage their long term health conditions whilst living independently. This way, there is an incentive for the provider to ‘perform’ and for both the provider and council to make financial savings • London Borough of Lambeth – The co-operative council, as trialled by Lambeth, is an innovative model which aims to involve local residents in co-producing and co-commissioning their services and pooling personal resources to create micro-mutuals. The council remains at the core of the commissioning process, adopting a facilitating role. Councillors and officers will retain their responsibility for safeguarding and scrutiny, but will also effectively take on the role of community organisers. • Essex County Council – By providing customer-centric ‘trip-advisor’ style performance data ‘Essex Assist’ on their local care services, ECC have created a platform from which will promote good quality service providers and drive up standards .They have also set up a social care trading company ‘Essex Cares’ which has helped to redefine the relationship between staff and customers by empowering staff. This has led to ‘Essex Cares’ achieving a 99% user satisfaction rating. • Selby District Council – Selby are one of a number of councils taking steps to decouple the council’s decision making function from the provision of services by creating a new service delivery vehicle ‘Access Selby’, which may involve a mixture of private, public and third sector ownership. There are barriers to achieving the strategic commissioning approach Despite the steps taken by of a number of councils, there remain a number of barriers to the sector-wide implementation of a wholesale strategic commissioning approach. These include: Executive Summary
8 • Barriers to innovation – One of the biggest barriers to innovation is the limited market and the limited engagement between the public sector and providers. However, despite this, councils were optimistic that opportunities would be given for external organisations to enter the market in the future, with approximately 80% saying that more contracts would be given to voluntary and community sector (VCS) and small and medium enterprises (SMEs), and 68% to larger companies. In addition, risk is so narrowly defined, and the political dimension of commissioning is shied away from, particularly in times of austerity. It is important not just to recognise that commissioning is about political decisions, priorities and fundamentals, but to positively embrace this.3 • Contractual barriers – There is a residual fear that by taking a more strategic commissioning approach, councils will lose sovereignty over service provision. Whilst opportunities exist to break-up, adjust the length or renegotiate contracts, there still seems to be a degree of rigidity in local government. For example, a 2008 Ipsos MORI survey noted that 66% of the sampled PFI contract managers devoted less than half of their time to managing the contract; it also noted that 42% of the contracts sampled had failed to levy any performance deductions in the past 12 months. These two statistics point to the crux of the problem; contract management is woefully under-resourced and contract managers are often unaware of their rights under the contract or how to enforce them. • Information barriers – Another major barrier is the lack of relevant information to make informed commissioning decisions. For example, 75% of councils surveyed thought that the availability of clearer national benchmarking data on provider performance would help with the commissioning process, and 90% thought that there were barriers around sharing data. Internal council communication between officers and members, and between departments was also cited as a barrier. • Cultural barriers – Few councils have any real confidence that strategic commissioning can take place without a significant shift in culture towards a less siloed approach to the delivery of services, with councillors taking on greater roles as community advocates and scrutinisers of performance. In our survey 91% of councils said that culture was a barrier to a more strategic commissioning approach, 65% said that the internal council structure was a barrier to strategic commissioning and 88% thought that the role of elected members would need to change. Furthermore, 70% said they needed more commissioning experts in order to make the transition. • Barriers to joint working – There was an almost unanimous view (91%) that councils should take the lead on the strategic commissioning of local services across the public sector. Yet despite this, 70% thought that national structures were a barrier and 97% said there were challenges around reforming the siloed nature of budgets. Much emphasis has been placed on rhetorical partnership working but within the constraints of individual budgets, practical progress in terms of holistic and whole life provision can be limited. Within the council itself, there is a siloed separation of subject matter experts, commissioners, procurement managers and corporate policy and high-level priority setting. • Capturing and measuring value for users and communities – This is a challenge both in terms of practical application and measurement and assessment. There have been many efforts to develop models to do measure value, but as yet, there has been limited progress in finding workable solutions. In the absence of being able to definitively measure social return, a focus on outcomes (be that contractually or otherwise) is one answer, and this is gaining credence 3S ee, for example, Unison, APSE & nationally. However, these practices are currently very sporadic, and in many LGIU (2011) Think Twice. cases products are commissioned rather than services. www.localis.org.uk
9 This report makes a number of recommendations for central and local government The report draws out a number of lessons, including a number of recommendations for central and local government, under nine broad themes: • Address siloed nature of public services – Central Government should offer continued support and resources for pooling budgets, data sharing across the public sector and giving councils greater financial flexibility to better reflect the long-term nature of investments in early intervention initiatives. Health and Wellbeing boards should also be given ‘teeth’ to enable effective partnership commissioning. • Focus on outcomes not processes – Central Government should promote national availability of benchmarking data on provider performance to enable commissioners to make informed decisions. Councils should be open minded about methods for achieving savings before moving to tender eg new providers, local authority trading companies (LATCs), support for Voluntary and Community Sector (VCS) or shared services. • Support a thriving market for all sectors – Central Government should support councils in trying to evidence social return. Councils should adopt various mechanisms to improve service design and procurement – including exploring innovative methods for supporting market and building capacity for VCS and SMEs before reaching procurement stages, and should look to utilise innovative funding models to revolutionise the way that services are delivered. • Redefine risk – Councils should work with partners to redefine risk, internally and externally, to ensure that money is spent on services which deliver the long term outcomes. They should amend SME risk categorisations so that small stable and profitable businesses that are high risk due to their size in relation to the contract value can still be awarded suitable contracts. • Create smarter, more flexible contracts – Councils should capitalise more on opportunities to value test and re-negotiate their contracts. • Redefine the roles and responsibilities of councillors and officers – Councils should support elected members to take on a greater role as community advocates and actively encourage members to take up scrutiny roles. They should embrace the culture change towards becoming strategic commissioners through officer and member training. • Make commissioning distinct from procurement and outsourcing – Councils should move from transactional to transformational savings, and work collectively to promote a clear vision of what commissioning means, including how this is distinct from outsourcing. • Work towards a new, more localist, understanding of value – Councils should continue to develop their own measures of local ‘value’, working together with other councils to compare and benchmark performance. • Involve communities in the commissioning process – Councils should give greater focus to how communities and providers can be involved in the commissioning process and priority setting, and should encourage and enable residents to share information and intelligence on their experiences of services, using the feedback of others to inform choices. Executive Summary
10 Introduction ‘Strategic commissioning’ has been a popular idea in local government for many years. Whilst very few authorities would claim that it is an approach which is applied consistently across all service areas (only 7% of councils surveyed said their services were ‘mainly outsourced’), and the precise terminology differs in various political contexts, the aspiration of more effective and joined-up service design and delivery is widespread. While councils already deliver a wide range of services, from social care to waste management and from leisure facilities to local schools, the Government’s forthcoming public service reforms will make this aspiration even more imperative at the local level, and local government will have a crucial role to play. Although touching on procurement and contracting issues, this report purposefully does not make prescriptions regarding the type of service that should be commissioned or most suitable providers for any particular service. This is because, as will become clear, strategic commissioning necessitates a willingness to look at how things can be done differently and innovatively, in some cases moving beyond traditional mechanisms of council provision. This report does also not claim that there is a one size fits all solution for strategic commissioning, and a structure that works for one locality may be very different to a successful one elsewhere. Of course there have been examinations of strategic commissioning in the past, and the analysis which follows will build on this canon of research. At a time of intense deliberation about the future of public services, it is now more vital than ever that councils consider how strategic commissioning could play a role in shaping their localities. This report explores the different contexts behind commissioning and provision and considers how council structures, officers and members, in collaboration with local residents, can promote best practice across local government. The landscape for public services is changing in the face of both economic pressures, and new emerging approaches to addressing local need. The role of local government therefore is also quickly evolving as locally-devolved decision making, choice and personalisation become the norm within a broader agenda for public service reform. The time is clearly right for the strategic commissioning council, with over 80% of local authorities set to take on this role in the short- to-medium term.4 4A ccording to a survey of over 100 This report will therefore explore a range of thorny issues relating to the councils conducted by Localis. See ‘A Note on Methodology’ and implementation of a more strategic commissioning approach in local Appendix A. government. The report is divided into three main sections:
11 • Part One – What is Strategic Commissioning? The first section draws together relevant literature with qualitative and quantitative evidence to provide a detailed context to the commissioning debate. It traces the history of commissioning from Compulsory Competitive Tendering in the 1980s through to the Best Value years and emerging calls for a better focus on outcomes. • Part Two – Approaches to Strategic Commissioning. There are many barriers – bureaucratic, financial, technical and specific – which arise in the standard commissioning process. This section addresses the procedural barriers to strategic commissioning, explores innovative approaches and highlights the key features and outcomes of good commissioning. The issues include the need for greater innovation in contracting and delivery, the importance of understanding value and commissioning for outcomes not processes the development of local markets, and intelligent procurement. • Part Three – What Does a Strategic Commissioning Council Look Like? Drawing together the above discussions, this section focuses on the structural barriers to strategic commissioning, and reveals paths to improvement. It explores how councils are evolving (and need to evolve) in order to facilitate more strategic commissioning. As will be illustrated, councils across the country are already making strides here, but this section will highlight the ongoing need for less siloed council and public sector structures, as well as the potential for councils to embrace the emerging roles and responsibilities for officers and members as part of a new conception of accountability. If the shift towards the commissioning of public services is to be truly transformational in terms of quality, efficiency and efficacy, then it is crucial that these barriers to commissioning strategically are overcome. A Note on Methodology The research which informed this report has been largely qualitative in nature. The methods employed have included semi-structured interviews and participant observation (through a private roundtable discussion). There has also been extensive consultation at all stages with commissioners, academics, private and voluntary sector providers, and commentators. This information has also been supplemented by quantitative data obtained through a survey which explored the theme of strategic commissioning. A questionnaire was sent to every council in England of whom 105 responded to questions on a range of topics from decision making processes to the delivery of services. Respondents came from various council types, and were based in all parts of England. The results of this survey are included in Appendix A. The focus of the report has been on current developments relevant to strategic commissioning and it is important to note that the models and case studies discussed throughout are about emerging innovations to address the issues identified, and as such do not necessarily focus on presenting results or findings. Introduction
12 1. What is Strategic Commissioning? The term commissioning has long been common currency in both local and national government, and has started to be discussed more widely in the public arena, in light of the proposed reforms to the NHS. However, there is still a good deal of confusion as to what commissioning really means, how it is distinct from procurement, and to what extent councils can truly be said to be ‘commissioning’, even where they are purchasing or ‘procuring’ a wide range of services from external providers. Commissioning should in essence be ‘provider neutral,’5 focusing on local need and the best pathways to deliver that need. With this in mind, commissioners may pursue any one of a number of options including procurement from public sector partners, private sector or third sector supply, or in-house delivery where capacity exits. In practice then, it could also result in the adoption of a wide variety of mechanisms: contracts, grants, shared services, local authority trading companies or even asset transfer. At present, outsourcing itself represents only about a fifth of total UK government expenditure.6 Provision is largely mixed across councils in the UK with analysis from our survey revealing that around 60% of commissioners would describe the mix of provision in their council as ‘fairly even’, with only 7% describing services as ‘mainly outsourced’.7 Since 2006 the Cabinet Office has defined commissioning as ‘the cycle of assessing the needs of people in an area, designing and then achieving appropriate outcomes. The service may be delivered by the public, private 5U nison, APSE & LGIU (2011) Think or civil society sectors’.8 It is worth noting however that within councils, Twice: The Role of Elected Members in Commissioning (London: Unison, procurement, which is one means of implementing commissioning, may adopt APSE & LGIU). very similar definitions. For instance, the definition set out in the National 6 Jameson, H (2011) Ensuring High Procurement Strategy – the DCLG’s guidance on procurement practice in local Quality Public Services: recognising government – is as follows: the role of the workforce in the future of outsourcing (London: IPA) 7 Localis Survey (June, 2011), see ‘Procurement is the process of acquiring goods, works and services, covering Appendix A. both acquisitions from third parties and from in-house providers. The process 8C abinet Office (2010) Modernising spans the whole life-cycle from identification of need, through to end of a Commissioning: Increasing the Role services contract or the end of the useful life of an asset.’9 of Charities, Social Enterprises, Mutuals and Cooperatives in Public Service Delivery, accessed at www. This compares, for example, to the following typical council definition of cabinetoffice.gov.uk [19/04/11], commissioning, which has many similarities: p.7. 9N ational Procurement Strategy, in ECC (2010) ‘Procurement Strategy: ‘Commissioning is the process of identifying needs within the population 2011/12-2013/14’, p.5. and developing policy direction/service models and the market to meet 10 Ibid., p.6. those needs in the most appropriate and cost effective way’.10
13 As these definitions make clear, there are significant overlaps between elements of procurement and commissioning, rendering close working relationships and formal mechanisms of interaction between procurement and commissioning functions essential. However it is also perhaps not surprising that, as research suggests, some officers and providers struggle to make the distinction between procurement and commissioning, a pattern which also became evident in the fieldwork for this study.11 Moreover, it is particularly problematic if procurement is simply categorised as the business-end of transactions, where efficiency savings are to be made, with little consideration of how these processes of designing appropriate tenders to meet prescribed budgets, actually relates to broader strategic aims. In addition, the National Audit Office (NAO) has been careful to outline the distinction between ‘cuts-driven’ and ‘intelligent decommissioning’; a distinction which will become increasingly pertinent as more and more councils adopt a commissioning approach against a backdrop of tightening budgets.12 Place-Shaping Crucial to the concept of strategic commissioning is a strong consideration of how services interact with the locality more broadly. In 2006, the Local Government White Paper set out the importance of partnership working at the local level, and the importance of local government as a strategic leader and ‘place shaper’. The two key tenets of this new place-shaping role were the Local Strategic Partnerships (LSPs) and the Local Area Agreements (LAAs).13 The LSPs represented the ‘overarching strategic partnership for an area’ and the LAAs were introduced in 2006 as a statutory requirement for county and unitary partners to prepare a ‘delivery plan for the strategy’, in consultation with LSP partners.14 Against the back-drop of an increasingly centralised approach to local co- ordination, the importance of the unique role of the local authority as a place shaper was also highlighted during the Lyons Inquiry (2006 – 2007), which promoted a ‘wider strategic role for local government’ and the ‘creative use of 11 See, for example, Murray (2009) powers and influence to promote the general well-being of community and its ‘Towards a Common Understanding citizens’.15 of the Differences Between Purchasing, Procurement and Commissioning in the UK Public In 2007 Lyons set out the key responsibilities for a local authority as a ‘place Sector’, in Journal of Purchasing & shaper’ as follows: Supply Management, 15, pp.198- 202. 12 For more detail on this see National • to exercise leadership in the joining up of resources and activities to ensure Audit Office (2011) ‘What that community interest is reflected in public services. Decommissioning is Not’, www. • to use their purchasing power to shape the market and facilitate greater user nao.org.uk [19/08/11] engagement with service delivery. 13 The LSPs had already established in 2000 to oversee the spending of the Neighbourhood Renewal Funds These features remain crucial to understanding the role of the council as a 14 DCLG (2006) Strong and strategic commissioner. Lyons also emphasised that LAAs should be ‘developed Prosperous Communities: The in a way which leaves enough space for local priorities’, as well as the significant Local Government White Paper, accessed at http://www. barrier presented by the inflexible funding system for local government.16 This communities.gov.uk/documents/ included a recommendation to establish outcomes-focused targets for the LAA. localgovernment [20/04/11] Outcomes are defined as ‘the changes that occur for stakeholders as a result of 15 Lyons, M (2007) Lyons Inquiry into the activity’.17 Local Government. Place-shaping: A Shared Ambition for the Future of Local Government, accessed at Where does Strategic Commissioning fit in? http://www.lyonsinquiry.org.uk/ Despite various attempts to define ‘strategic commissioning’, it remains highly [06/04/11] contested. The idea of taking a more strategic approach to commissioning has 16 Ibid., p.18. emerged as part of the general trend towards exploring greater opportunities 17 Cumming, L.M. & Dick, A., Filkem, G. &Sturgess, G.L. (2009) Better for outsourcing to the private sector and has therefore often been used, or Outcomes (London: 2020 Public perceived as, shorthand for ‘efficiently outsourcing in all possible service areas’. Services Trust), p.19. What is Strategic Commissioning?
14 As a consequence, the truly provider neutral implications of the concept have, we believe, not been sufficiently debated to date. It is necessary then to determine what ‘strategic commissioning’ really means in the context of the broader definition of commissioning and commissioners, as set out above. To do this it is helpful to start with a simple definition. The Oxford English Dictionary defines strategic as: 1 relating to the identification of long-term or overall aims and interests and the means of achieving them; or 2 designed or planned to serve a particular purpose. You can only be strategic then in the pursuit of specified aims, interests and purpose. With this in mind, we need to consider what it might mean to act ‘strategically’ in the process of weighing up need, outcomes and cost. Since the purpose of local government is to serve the community it represents, the key strategic role for councils is to facilitate an approach to fulfil the needs and requirements of that community and to act as a ‘place shaper’ in order to sustain this approach in the long term. Who/What is a Commissioner? Central to the definition of commissioning, although often ignored, is the question of who/what is a commissioner? Interview responses showed a variety of interpretations of commissioning, strategic commissioning and who is the commissioner. Many, as is to be expected, used commissioning and procurement as virtually synonymous. Most talked only about commissioning as a centralised vehicle for outsourcing services (or investing externally) to the private or voluntary and community sector (VCS). However, at the same time it is evident that there is also a real awakening to the role of individuals and communities as commissioners. There is currently a good deal of interesting work encouraging us to think differently about who should take the lead in the design, delivery and assessment of public services, looking at the role of co- production, and social productivity for example.18 These sentiments, although not always expressed in these particular terms, were also reflected in the aims and aspirations of many of the people who contributed to this research. Therefore, commissioners need not be just councils as organisations, but might also be individuals, communities or councillors themselves. And commissioning starts with the democratic process. So ‘strategic’ commissioning is therefore not just about decisions made by key individuals but about how priorities are shaped and pursued, and how outcomes delivered for residents. Discussing commissioners in this much broader way helps us to take a step back from some of the more entrenched practices within elements, particularly procurement, of the commissioning process. Another challenging issue related to the question of ‘who commissions?’ is the extent to which councils can be both commissioners and providers. At the heart of the debate is to what extent innovation and insight is really captured 18 O n co-production, see, for from the very beginning of the commissioning process – that is, developing example, Boyle, D., Slay, J. & Stephens, L. (2010) Public Services and setting priorities, analysing need and designing services, as well as giving Inside Out: Putting co-production providers more opportunity to feed into procurement processes and tenders. into practice (London: Nef & Within councils however, there are still question marks over the extent to which NESTA). On social productivity, see, for example, 2020 Public the provision of services interferes with strategic commissioning process, or Services Hub & LSIS (2011) The whether the ‘externalisation’ of provision might enable councillors to take a Further Education and Skills Sector more strategic, ‘place-shaping’ approach. This report attempts to consider in 2020: A social productivity approach, accessed at www. all of these complexities in the discussion of strategic commissioning which thersa.org [30/05/11] follows. www.localis.org.uk
15 Visualising Strategic Commissioning The commissioning process should be one which spans the breadth of the council and begins at the very top of the decision making structure and at the very grassroots simultaneously. In this way, the commissioning process should begin and end with the councillor’s democratic relationship with residents. There are a number of key features of commissioning as captured in the below Cabinet Office cycle.19 1. Assessing needs 2. Identifying priority needs and outcomes 3. Designing the specification which will achieve these outcomes 4. Sourcing the providers to meet this specification 5. Managing the delivery of the outcomes 6. Monitoring, reviewing and learning from delivery to inform future commissioning The commissioning process is usually described as a cycle because the above stages are ongoing, and interrelated. In fact, a standard cyclical representation probably doesn’t go far enough – it might be more helpful to visualise the process as a steering wheel, because it is important to understand that the different stages are inherently indistinct and will happen in no particular order, and often simultaneously. The stages of the process go back and forth, rather than consecutively. With this in mind, the below diagram is particularly helpful. Figure 1 Strategic Commissioning Process operates as a Steering Wheel and Moves Back and Forth – it is not Cyclical Gaining top level multi-agency engagement and sign up Assessing needs and Monitoring, reviewing and mapping the market learning from delivery and performance to inform future commissioning Ensuring the involvement of service users and customers as co-developers of services Managing contacts and the delivery of Aligning with the the impacts and results national drivers Multi-agency Commissioning Sourcing the providers Process Identifying the priority to meet the specification needs and impacts Designing the specification Identifying the full breadth that will achieve greatest impact of available multi-agency and community resources Managing the market and building capacity Synthesis analysis Ensuring effectiveness and efficiency decommissioning, reshaping andservice design 19 Cabinet Office (2010), Source: Essex County Council Modernising Commissioning, p.7-8. What is Strategic Commissioning?
16 This is an excellent representation of the many complex facets of effective commissioning. Of note in particular for the discussion which follows is the ‘synthesis analysis’ which is the process by which an understanding of need, the market and ongoing effectiveness are reconciled with an appreciation of the available resources. Key Lessons • It is important to break down misconceptions around commissioning as this can create a barrier both within and outside councils – small providers in particular cannot engage with the process if they do not have proper understanding of those processes (see Murray, 2011). • Within councils opportunities for procurement and directorates to work together are often missed due to misunderstandings and excessive compartmentalisation of procurement and efficiency savings. Closer working would be beneficial in ensuring that cost savings and service improvement are better joined up. • Commissioning should be provider neutral focusing on local need and the best pathways to deliver services that meet that need. • Commissioners need not be councils as institutions but can be individuals, communities or councillors. • There are a number of important questions that councils must address when shifting to a more strategic commissioning approach, including the extent to which council’s roles as both commissioners and providers are in conflict, and whether ‘externalising’ provision would enable a more effective strategic commissioning approach. The Benefits of Strategic Commissioning The main benefit of strategic commissioning is really the process itself. The systematic process of understanding need, the market, performance and an appreciation of available resources enables councils to focus on ensuring the delivery of quality services and value to communities. However, the process itself can also result in a wide range of benefits, including: • Greater efficiency – By taking a provider-neutral approach to the delivery of services, the commissioning process opens up new possibilities to deliver services in more efficient ways, such as through shared services or by capitalising on the benefits that the private, public or third sector can bring. It also potentially opens up opportunities to take advantage of initiatives such as pooled budgets, which can deliver financial savings across the public sector. Early intervention investment such as through social impact bonds offers another opportunity for councils to deliver long-term value for money for council-tax payers, transferring risk and capital investment away from local government in times of austerity, thus enabling them to deliver value in the long term as well as the short term. • A focus on outcomes, not processes – By studying the needs of local residents as part of the commissioning process, and by taking a long term, locally specific to the definition of ‘value’, councils can tailor the provision of services to deliver the most important outcomes for residents. This might mean that some www.localis.org.uk
17 services which have been delivered for historic reasons may be delivered in new ways to reflect changed circumstances, or in some instances not at all. On the other hand, some services might be perceived to be delivering more ‘value’ than was first anticipated, and there may be opportunities to extend that service to deliver further outcomes locally. In this way, strategic commissioning can justifiably claim to improve lives, and not just tick boxes. • Stimulating local enterprise – By taking a comprehensive strategic commissioning approach, councils could leverage their significant resources and buying power to create new local markets in the provision of services, which could create new jobs and growth, as well as the potential to drive competition, choice and innovation in local services. • Focus on what is strategically important – By ‘externalising’ the provision of services, there may be opportunities to resolve any conflict in the council’s role as both commissioner and provider of services. This may mean separating the council’s decision making function from delivery through an arms length organisation, for example. The benefits of such an approach may be both cultural and practical as the leadership of the council focuses on taking a strategic approach to delivering value for local residents. Key Lessons • The main benefit of strategic commissioning is the commissioning process itself, which enables councils to think more strategically about how to best meet the needs of local residents. • Strategic commissioning can also result in a number of other benefits including greater efficiency, a focus on outcomes and the stimulation of local enterprise. Historical Approaches to Commissioning in Local Government Despite the popular image of an inflexible sector, slow to change, adaptation for local authorities in the way they deliver services is not something new. Local government has already undergone a significant transformation over the last 20-30 years, and its number of statutory duties has doubled between 1997 and 2010.20 Modern-day authorities have long been open to working with the private or voluntary sector to ensure the delivery of public services, and for many decades this was done sporadically and at the council’s discretion. However, the first major shift in terms of commissioning and procurement was when compulsory competitive tendering (CCT) was introduced through the 1980 Local Government, Planning and Land Act. For local authorities, this initially only applied to construction and maintenance (although it was often implemented more widely), but was extended as part of the 1988 Local Government Act to 20 See DCLG ‘Review of also include a greater number of specified services including cleaning, refuse Statutory Duties on Local collection, catering, grounds maintenance and vehicle maintenance.21 Following Government’, http://www. this a series of secondary legislative instruments ensured that by 1995 CCT communities.gov.uk/statements/ localgovernment/1935018 also extended to sports and leisure, and a wide range of professional services [01/07/11] including legal, property, financial and personnel.22 However, it is worth noting 21 See Patterson, A. & Pinch, P.L. that CCT in professional services was not widely implemented in practice, (2000) ‘Public Sector Restructuring due to various complications such as pre-emptive voluntary agreements with and Regional Development: the impact of compulsory competitive preferred contractors and local government restructuring. tendering in the UK’, Regional Studies, 34(3), pp.265-275. The introduction of CCT was part of the then Conservative Government’s 22 Ibid. efforts to restructure how public services were delivered and to reduce what it What is Strategic Commissioning?
18 perceived to be unnecessary waste in local government. It has been suggested that the Government introduced the legislation in response to limited pursuit of competitive tendering at the local level, despite what it perceived as the ‘overwhelming evidence of efficiency gains from competition’.23 This proved to be a controversial approach and some saw it as placing too much emphasis on cost, at the expense of quality. Since a key component was to ensure competition, lower bids from private contractors could not be rejected without ‘good reason’ and consequently, as revealed by research undertaken by the Department for Environment, around 91% of contracts were awarded to the lowest bidder in the first round of CCT. Considerations which were defined as ‘non commercial’ (such as pay rates and employee conditions) were not to be considered as part of the decision to award a contract.24 Changing Perceptions of ‘Outsourcing’ By the early 1990s the characterisation of outsourcing was starting to evolve from a purely transactional approach to something more collaborative. Ideas around partnership and collaboration, although not traditionally associated with competitive market economics, were also emerging as part of a desire to devolve responsibility for public services from the government to private and voluntary sector.25 In this way there was some recognition of the possibility for and desirability of outsourcing to achieve ongoing service improvement as well as efficiency. This trend was evident in New Labour’s ‘Best Value’ legislation, introduced in the Local Government Act, 1999, which was supposedly a response to the failures of CCT, but did not represent a significant challenge to the emerging orthodoxy.26 Under Best Value, each local authority has a duty to ‘make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness’.27 23 P arker, D. (1990) ‘The 1998 Local Government Act and Compulsory Over the past several years then, there has been a discernable (if not wholly Competitive Tendering’, Urban transformational) shift away from the traditional distinctions between public and Studies, 27 (5), pp.654. private/voluntary sector service provision. The standard perception that in-house 24 S ee Patterson, A. & Pinch, P.L. (2000) ‘Public Sector Restructuring delivery involves no external parties, and outsourcing is purely transactional, and Regional Development’ has been eroded somewhat throughout the Best Value era.28 The rise of public- 25 F otaki, M (2010) ‘Towards private partnerships in procurement was a key feature of this. Public-private Developing New Partnerships partnerships come in a variety of different forms, including: strategic service in Public Services: Users as Consumers, Citizens and/or delivery partnerships where partners each contribute a particular expertise Co-Producers in Health and Social to some part of commissioning, procurement and delivery; Private Finance Care in England and Sweden’, in Initiatives (PFIs), which are financially driven, and; purchasing consortia, which Public Administration, pp.1-22. focus more on economies of scale than delivery.29 It is interesting to note that our 26 Local Government Association & CBI (2009) Commissioning survey indicates, when procuring services externally, 44% of councils regularly strategically for better public take input from providers when developing tenders – with almost 41% doing so services across local government on at least an occasional basis. Public-private interaction then, is nothing new. (London: CBI), p.9. 27 Local Government Act 2000 PFIs in particular have attracted a lot of controversy. It is estimated that there 28 B ovaird, T(2006), ‘Developing New Relationships with the ‘Market’ have been over 700 PFI schemes to date, including the construction of new in the Procurement of Public schools, hospitals and prisons.30 The National Audit Office found that although Services’ Public Administration, unsuitable in some instances, PFIs can provide good value for money where the Vol.84, No. 1, p.84. government behaves as an intelligent consumer.31 Furthermore, there appears 29 Ibid., p.85. 30 C ave, R. (2011) ‘HM Treasury ‘in to be no intention for the Government to stop using PFIs, as in times of economic dark’ over ‘excessive’ PFI profits’, downturn, they can also play a role in giving the public sector the chance to BBC, accessed at http://www. access capital. However, as an August 2011 Treasury Select Committee report bbc.co.uk/news/ noted, it would seem that opportunities for the sector to harness its significant 31 N ational Audit Office (2011) Lessons From PFI and Other spending power in intelligent ways have sometimes been missed. Further Projects, accessed at http://www. attention will be needed in the coming years to identify and explore more nao.org.uk [22/06/11] imaginative approaches to ensure that both public and private partners, as www.localis.org.uk
19 well as local tax payers, can derive the maximum benefits, and balance short and long term interests. According to a survey32 performed by Ipsos MORI in 2008 81% of PFI projects had not gone through any value-testing exercise since they had been signed. Furthermore, the survey noted that 66% of the sampled PFI contract managers devoted less than half of their time to managing the contract; it also noted that 42% of the contracts sampled had failed to levy any performance deductions in the past 12 months. These two statistics point to the crux of the problem; contract management is woefully under-resourced and contract managers are often unaware of their rights under the contract or how to enforce them. Public sector contractual rights are going unused, and this is the elephant in the room; there is an expensively negotiated contract gathering dust at the bottom of a drawer that must be reviewed to unlock and ensure full value and excellent service for the public sector. Towards a Joined-Up Approach In line with this emerging outcomes focus, the last few years of the Labour Government also saw a growing emphasis on engaging with the community in order to identify and understand these outcomes. An important aspect of this was developing a shared understanding of local need which partners could draw on in their efforts to promote better health and wellbeing. The Local Government and Public Involvement in Health Act 2007 set out the requirement for a Joint Strategic Needs Assessment (JSNA) to be carried out by local partners with stakeholder involvement and engagement.33 The JSNA was intended to identify areas for priority action and help local commissioners and providers to shape services to address these priority needs.’34 It was, in short, an attempt to recast the user as a potential shaper. In 2008 this emphasis on local consultation was extended to apply directly to the procurement aspects of commissioning. The statutory guidance on ‘Creating strong, safe and prosperous communities’ expanded on the best value principles in the Local Government Act and introduced new duties to ‘inform, consult, involve’ local people in decision making and the duty to create a sustainable community strategy.35 Authorities were urged to ‘co-design/work’ with ‘representatives of local persons’ in designing policies and services, in particular relating to commissioning. As well as the emphasis on community engagement, there was also a strong agenda for improved partnership working across the public sector. 32 PWC (2008), Is PFI working? This was encapsulated in particular in the ‘Total Place’ pilots, launched in 2009 Buying Excellent, Settling for Average which sought to explore how a ‘whole area’ or so-called ‘place-based’ approach 33 Local Government Improvement & could deliver ‘better outcomes and improved value for money’.36 Development, Joint Strategic Needs Assessment (JSNA), http://www. Consequently, the first decade of the 21st century saw an emergence of a more idea.gov.uk/idk/core/page. do?pageId=7942796 holistic approach to commissioning (including a greater focus on outcomes and 34 Department of Health (2007) engagement), and a defined mandate for local authorities as place shapers, Joint Strategic Needs Assessment, as part of the growing recognition of the role of public services in wider local accessed at http://www.dh.gov. economic development.37 It also saw increased emphasis, at a national level, uk/en [01/08/11] on notions of ‘joined-up’ government: the idea that thinking of a problem in 35 DCLG (2008) Creating Strong, Safe and Prosperous Communities: the context of the wider system, rather than merely in and of itself, would lead Statutory Guidance, http:// to greater efficiency across the board. It is increasingly acknowledged that www.communities.gov.uk/ investment in one area of policy can have a knock-on effect for another – for publications/localgovernment/ strongsafeprosperous instance, housing on health, education on law and order – and commissioning, 36 HM Treasury & DCLG (2010) Total by partially decoupling from the siloed cultures and structures of local Place: A Whole Area Approach government, can make a telling contribution to this process. to Public Services, http://www. hm-treasury.gov.uk/psr_total_place. htm, p.14. However, it is still important to note that the shift towards ‘strategic commissioning’ 37 See Patterson, A. & Pinch, P.L. has happened in the context of a move towards greater outsourcing of services. (2000) ‘Public Sector Restructuring This explains a great deal about why the term commissioning has become and Regional Development’ What is Strategic Commissioning?
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